Has The World Gone Nuts?

The notion that investors are “reaching for yield” when investing in risky sovereign bonds has become too much of a cliché for Macquarie’s Victor Shvets. The problem is that concept provides easy cover, a limp excuse for bond investors making obviously flawed decisions, as was the case during the Petrobras 100-year bond offering. Those same set of circumstances appear to again be taking hold across the emerging market landscape, and institutional investors are falling into the same trap.

While trusted research reports were touting the Petrobras 100-year bond deal, certain investors, most notably Bridgewater Associates, took the opposing point of view. To the world’s largest hedge fund, it was obvious the emperor had no clothes. Despite all the...